People throw out phrases like “trust fund” or discuss desires to “open a trust.” However, these are not necessarily accurate. These phrases often lead people to get the wrong idea of what a trust really is and how it can be used. To help clear up some of these common misnomers, let’s dive into discussing one of the most common types of trusts.
Revocable Living Trust
The Revocable Living Trust is set up for beneficiaries to avoid having to go through probate with their loved one’s assets. This type of trust is set up by the grantor, the person who owns the assets he or she wishes to pass on. The grantor then chooses to move their assets to a trust. The trust then becomes the owner of the assets but is controlled by a trustee. The trustee is typically the grantor until he or she passes. Then the successor trustees that are named within the trust become the trustees. These can be the beneficiaries of the trust or those appointed to act as the managers of the trust for the beneficiaries. In short, the assets never change ownership, but new trustees are placed in charge of the assets.
Some of the key uses for these types of trust are for mental disability planning and planning for minor children. Revocable Living Trusts use language that will keep the state legal system from instructing how your money is managed and who gets it. This allows your loved ones to retain flexibility and control, even after you can no longer make decisions or are gone. It will also allow you to give the money to your beneficiaries when you desire. A court would normally allow funds from your savings to be distributed at age 18, but a trust allows you to make these distributions whenever you see fit for your beneficiaries to manage them with maturity and responsibility.
As you can see, a Revocable Living Trust can be a valuable tool in making your disability or passing less intimidating for your grieving heirs. It allows these events to stay private and give you control to pass wealth on efficiently. One of the biggest mistakes you can make after you create a trust is to not fund it. This simply means that once the trust is created, your assets need to be retitled in the trust’s name. To do this, you should speak to your financial institutions, have them rename your accounts, take inventory, and make sure everything is accounted for. Doing this will ensure you are set up and protected should the unexpected happen.
Stewardship Financial can help you determine what legal documents to have in place on a case by case basis. If you have more questions about trusts and the right type of documentation for you and your family, reach out to us here.